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14 TIPS FROM LEADING EXPERTS AND BOLD ENTREPRENEURS WILL HELP YOU EXPAND INTERNATIONALLY
id you know that 95 percent of the world’s population lives outside the United States? That going global isn’t really all that difficult? That when you determine your business is ready to go global, you are well on your way? That resources are aplenty on the Internet to help you expand overseas? Chances are, you’re one of the many business owners too busy to pay attention to anything other than running your company. Our goal here is to help you get your arms around a host of issues to help you expand your business globally— if that is, in fact, the right thing for your business. We consulted with leading experts in the field of international business and picked the brains of a new breed of young, bold international entrepreneurs to learn the basics of global expansion. We came up with 14 solid tips for getting started in the global marketplace. Read on to find out which advice suits you.
Determine how much you can afford to invest in your international expansion efforts. Will it be based on 10 percent of your
domestic business profits, on a pay-as-you-can-afford process or on gut instincts? “Early on, I just wasn’t ready financially, emotionally or intellectually to go global,” says 37-year-old Greg Bernstein, president of Dallasbased Global Outdoor Services, Inc., an outdoor advertising media buying service that assists clients in buying outdoor media both domestically and in Europe. “But years later, I was. It went great only because I learned how to overcome language barriers, manage time differences and lock in on exchange-rate contracts.”
It takes time and patience to build a great, enduring global enterprise, so be patient and plan for the long haul. Nobody knows this better than 29-year-old Javae Wright Sr., CEO and chair of Leadaz International Sportswear, Inc., an athletic footwear and apparel company in Champaign, Illinois. Wright’s company relies on strengthening the mentality of athletes abroad by promoting all that the company stands for: leadership. In his company’s early days, after its launch in 2002, Wright’s biggest challenge in crossing borders was the long lead time for orders. “We would place orders with our Chinese manufacturer and then expect delivery within a week. We would forget that the goods—thousands of miles away—moved slowly by vessel to the port of entry and then by truck. An international shipment also required customs clearance, a factor that adds even more time on
Plan at least a two-year lead time for world market penetration.
by laurel delaney
Department of Commerce, Upper Midwest Export Assistance Centers. “One of our key services, the Gold Key, actually sets up appointments with potential buyers, agents and distributors for a company, making a business trip for any size company much more efficient and cost-effective.” Sokalski advises never to stop developing your own foreign network of customers and professionals at the top of your industry. “Call them up. These people can be helpful to you in more ways than you can imagine. If they see that you know your stuff, you will be surprised at how forthcoming they can be.”
to the delivery schedule,” says Wright. “The lesson we learned and caution others on is to establish a grace period of about a week if you want to meet customer deadlines.”
Pick a product or service to take or source overseas.
You can’t be all things to all people. Decide on something, then stick with it. “And don’t take no for an answer,” says Wright. “Persistence is more important than all else.”
Conduct market research to identify your prime target markets. Find out where in the world your
product will be in greatest demand. Market research is a powerful tool for exploring and identifying the fastest-growing, most penetrable market for your product. Take the case of Gregor Sokalski, a 31-year-old American and an MBA graduate of the University of Chicago. Sokalski did a stint in London as an investment banker for a year before switching to an Internet B2B startup. He then started London-based Moxie, a high-quality takeaway food retailer that was grounded on the principals of highly successful U.S. business models. Had Sokalski conducted more extensive market research, worked at a similar business for a while or used a London food retailer business model instead of U.S.–based model, he may have saved himself a lot of dough.
Establish a direct or indirect method of export. It
all boils down to export strategy and how much control you wish to exercise over your ventures. On the other hand, readiness to seize an opportunity is more important than having your whole strategy nailed down beforehand. “You simply must believe in yourself, your idea and your strategy,” says Sokalski. “Seven out of 10 will tell you it won’t work. It may not, but if you don’t try, someone else will.”
Hire a good lawyer, a savvy banker, a knowledgeable accountant and a seasoned transport specialist, each of whom specializes in international transactions.
You may feel that you can’t afford these professional services,
“MOST OF OUR SERVICES ARE OF LITTLE OR NO COST TO COMPANIES. ONE OF OUR KEY SERVICES, THE GOLD KEY, ACTUALLY SETS UP APPOINTMENTS WITH POTENTIAL BUYERS, AGENTS AND DISTRIBUTORS FOR A COMPANY, MAKING A BUSINESS TRIP FOR ANY SIZE COMPANY MUCH MORE EFFICIENT AND COST-EFFECTIVE.” —MARY JOYCE, U.S. DEPARTMENT OF COMMERCE
“Everything worked for Moxie but its location. We had great press and loyal customers, but just not enough of them were there at breakfast,” says Sokalski. “You need to be particularly sensitive to cultural issues in your foreign markets. This may require a year or two of experience working with an established local company before you forge out on your own.” but you can’t afford to do without them. Listen to their advice without bias. Says Sokalski, “If you haven’t made it happen yet, there is a lot to learn from these individuals who have.”
Prepare pricing, and determine landed costs. Be ready to test out your price on your customer, and then negotiate from there. For Leadaz, quotas—a specific unit or dollar limit applied to a particular type of good—on cotton and polyester fabrics used to manufacture its products became a pricing problem. Luckily, the quotas were lifted in January; if they had not been, Leadaz would have been forced to source elsewhere or pay a 50 percent premium on the price of the products. Customers would have balked. The next logical place to source was Mexico, where the transportation distance was shorter but pricing was still higher, even without quotas. “It nearly became a wash,” says Wright, “but we are relieved to continue with our Asian manufacturer, because they offer remarkable efficiency.”
Research the data to predict how your product will sell in a specific geographic location. Doing
your homework will enable you to find out how much you will be able to sell over a specific period of time. “Attracting and retaining sophisticated local talent will enable you to understand the local market and the industry much faster than anything else,” says Sokalski. “In the end, you need to be running a business that is local, not simply an American outpost in a foreign land.”
Find cross-border customers. There is no business overseas for you unless you locate customers first. The solution is to focus on a free resource such as the U.S. Commercial Service, which provides customized market research, general insights (including cultural), and market reports on various industries in almost any market in the world with export potential. “Most of our services are of little or no cost to companies,” says Mary Joyce, network director, U.S.
Set up terms, conditions and other financing options. Agree on terms of payment in
advance, and never, ever sell on open account to a brand-new customer. Many young exporting companies fear dealing with either how to get paid or how to finance their transactions. Tess Morrison, director of the International Trade Center
at the University of Illinois, Urbana-Champaign, notes that the U.S. government has programs to help exporters with such issues, with a minimum of requirements: A company must be in business for at least one year (although it may not be exporting), and it must be profitable. Three critical questions to ask yourself: Can I sell a product? Can I collect money on the transaction? Can I generate a profit? If the answers are a resounding yes to all, then look into the SBA’s pre-export line of credit, which has several variations. “The government will guarantee to your bank 90 percent of the loaned amount,” says Morrison. “You can then borrow against an international order to fulfill that order.” Check with the nearest international SBA office or your state’s international trade office for help with the application paperwork.
Brush up on documentation and export licensing procedures. If you find this too time-consuming,
Arm yourself with culture-specific information, courtesies, professionalism and consistency. Your goal should be to enter a different culture, adapt to it and make it your own. “Visit on a regular basis,” says Ray Smilor, an internationally recognized expert in entrepreneurship and executive director of the Beyster Institute, which promotes global entrepreneurship at the Rady School of Management at University of California, San Diego. Yet finding good, trustworthy people with whom you can have a great business relationship is not easy. Wright indicates it is best to find someone who is eager to help and enthusiastic about working together: “I found my key overseas manufacturer through an 85-year-old person who later became a friend and mentor to me. Sharing my story opened all sorts of possibilities and taught me not to limit myself in terms of whom I sold to or where I sourced my product.”
Make personal contact with your new targets.
hire a freight forwarder. Use their expertise to your advantage. As in the case of Leadaz, a fierce conversation about how long it takes to move product from one country to another would have saved them from a lot of frustration, not to mention earning and preserving the trust of local buyers.
Need some additional help going global? Check out these resources: 1. Center for International Business Education and Research (CIBER), at University of Illinois, UrbanaChampaign: www.ciber.uiuc.edu 2. Country Watch: www.countrywatch.com 3. The Federation of International Trade Associations: www.fita.org/index.html 4. globalEDGE, from Michigan State University: globaledge.msu.edu 5. GlobeTrade: www.globetrade.com 6. International Trade Administration, U.S. Department of Commerce: www.ita.doc.gov/index.html 7. MyExports, a public-private partnership of the U.S. Department of Commerce and Global Publishers LLC: www.myexports.com/resource_links/index.html 8. Office of International Trade, U.S. Small Business Administration: www.sbaonline.sba.gov/OIT 9. Stat-USA/Internet, from the U.S. Department of Commerce: www.stat-usa.gov 10. U.S. government export portal: www.export.gov 11. U.S. Commercial Service: www.buyusa.gov/home
In charting your global strategy, consider joining forces with another company of similar size and market presence that is located in a foreign country where you are already doing business, or would like to. Gauge your readiness to take on a 50/50 partnership. “Establish a foothold by working with a credible organization in the country where you wish to do business,” says Smilor. “But also identify a trusted and knowledgeable on-site person. You might find this person— who has a good personal network, knows how to work in the domestic system, and can make introductions and connections for you—via references or previous experience.” Consider Sokalski, who is doing just that by helping foreign businesses bring their operations to the U.K. as a partner in EUROPstart, a business development consultancy with specialists in France, Germany, Italy, Spain and the U.K.
Enjoy the journey. Never forget that you are the most valuable business asset you have. “Take a chance. If you fail, you will have learned an important lesson: You can get back up and do it a different way,” says Wright. If he had to do it all over again, would he have gone global, and so soon? “Most definitely. The relationships have been personally and professionally rewarding.” Sokalski feels the same. “You will never take the first step out of your comfort zone unless you acknowledge that failure in the mechanics of creation is a possibility. Had Moxie worked, I would not have as many interesting London-based opportunities, nor would I have amassed the valuable experience that global business executives acknowledge. I am more prepared for next time—and there will be a next time.” Now that you have determined your business is poised for new growth, get your arms around the world and expand your business globally.
Explore cross-border alliances and partnerships.
Laurel Delaney runs GlobeTrade.com and LaurelDelaney.com, both Chicago-based firms that specialize in international entrepreneurship. She is also the creator of “The Global Small Business Blog” (borderbuster.blogspot.com), which is highly regarded for its coverage on global small business. You can reach Delaney at firstname.lastname@example.org.